Securities Exchange Act of 1934
Release No. 50706 / November 19, 2004

Admin. Proc. File No. 3-11743

ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS AND IMPOSING A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934

I.

The Securities and Exchange Commission ("Commission") deems it appropriate that public cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against eFunds Corporation ("eFunds" or "Respondent").

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over it and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings, Making Findings and Imposing a Cease-and-Desist Order Pursuant to Section 21C of the Securities Exchange Act of 1934 ("Order"), as set forth below.

III.

On the basis of this Order and Respondent's Offer, the Commission finds1 that:

Respondent

1. eFunds, a Delaware corporation with its principal executive office in Scottsdale, Arizona, processes electronic payments including debit card and automated teller machine ("ATM") transactions. eFunds' common stock is registered with the Commission pursuant to Section 12(b) of the Exchange Act, and trades on the New York Stock Exchange. Before its listing on the NYSE, during the period of the conduct discussed herein, eFunds' common stock was registered under Section 12(g) of the Exchange Act and traded on the NASDAQ National Market System.

Other Relevant Entities

2. Access Cash International, L.L.C. ("Access Cash"), a Delaware limited liability company, headquartered in Saint Paul, Minnesota, was a privately held company primarily in the business of deploying and managing ATMs. In March 2000, eFunds paid $20 million to acquire an approximately 24 percent interest in Access Cash. On October 10, 2001, eFunds purchased the remaining 76 percent of Access Cash. Access Cash's securities were never listed on any exchange and the company never filed periodic reports with the Commission.

3. ATM Holding, Inc., a Delaware corporation, was a holding company created and owned by the founders of Access Cash in March 2000 to facilitate eFunds' acquisition of an approximately 24 percent interest in Access Cash. ATM Holding possessed no assets other than a 76 percent ownership interest in Access Cash. On October 10, 2001, eFunds purchased the remaining 76 percent of Access Cash by purchasing ATM Holding. ATM Holding's securities were never listed on any exchange and the company never filed periodic reports with the Commission.

eFunds' Transactions with Access Cash & ATM Holding

4. In eFunds' financial statements filed with its Form 10-Q for the second quarter of 2001, eFunds improperly recognized $2.1 million in revenue from a transaction with Access Cash, an affiliated entity. eFunds' improper revenue recognition overstated net income by 11.5 percent in the second quarter of 2001. Without the improper revenue recognition, eFunds would not have met consensus analysts' expectations for that quarter.

5. On September 1, 2000, eFunds and Access Cash entered into a management agreement whereby Access Cash agreed to assign its future ATM deployment and management revenues to eFunds, in exchange for eFunds' agreement to assume responsibility for management of the ATM business and to pay a monthly management fee, initially set at approximately $5.2 million per month ("Management Agreement"). The amount of the management fee was designed to approximate Access Cash's historical revenue from its ATM deployment and management business. The Management Agreement explicitly excluded eFunds' management of Access Cash's ATM equipment sales business.

6. On March 1, 2001, Access Cash attempted to exercise an option to cancel the Management Agreement, effective September 1, 2001. eFunds challenged Access Cash's ability to terminate the Management Agreement and instead sought to expand the Management Agreement going forward by including eFunds' management of Access Cash's equipment sales business. Specifically, eFunds sought to amend the Management Agreement so that, in exchange for eFunds paying an additional management fee to Access Cash and taking responsibility for the equipment sales business, Access Cash would assign its equipment sales revenue to eFunds.

7. During June 2001 negotiations, eFunds and Access Cash agreed to provisions amending the Management Agreement to include eFunds' management of Access Cash's equipment sales business. Specifically, starting July 1, 2001, eFunds agreed to pay an additional management fee of $700,000 per month and to assume responsibility for ATM equipment sales. In return, starting July 1, 2001, Access Cash agreed to assign its equipment sale revenues to eFunds, which in the preceding months had been approximately $700,000 per month. In the proposed amendment, eFunds and Access Cash further agreed to resolve their prior disagreements as to Access Cash's prior attempts to terminate the Management Agreement by extending the term through March 31, 2002.

8. As part of the proposed amendment, eFunds also attempted to settle past disputes regarding the implementation of the Management Agreement by requesting that Access Cash make a penalty payment in exchange for a release of all eFunds' potential claims. eFunds further requested that Access Cash make the penalty payment by assigning to eFunds Access Cash's second quarter 2001 equipment sales revenues, which were expected to be approximately $2.1 million for the quarter.

9. Access Cash initially refused to make the penalty payment requested by eFunds. In order to obtain Access Cash's penalty payment in the second quarter of 2001, certain eFunds executives agreed to include a provision whereby eFunds would pay Access Cash an "additional sales assistance consulting fee" of $250,000 per month for the remaining nine-month term of the Management Agreement, for a total of $2.25 million. Certain eFunds executives knew that Access Cash did not have to perform any additional work to receive the additional sales assistance consulting fee and that eFunds was obligated to pay the fee for the entire remaining term of the Management Agreement, even if either party terminated the Management Agreement early. With the inclusion of the additional sales assistance consulting fee, Access Cash agreed to make the penalty payment. On June 30, 2001, eFunds and Access Cash executed the amendment to the Management Agreement (the "Amendment Agreement").

10. During negotiations between eFunds and Access Cash regarding the Amendment Agreement, ATM Holding continued its ongoing efforts to sell to eFunds the remaining 76 percent of Access Cash. On June 30, 2001, Access Cash's chief executive officer informed an eFunds executive that, while he had signed the Amendment Agreement, he would not return an executed copy to eFunds until eFunds and ATM Holding had finalized a separate agreement whereby eFunds would commit to purchase the remainder of Access Cash for a mutually agreeable price and over a mutually agreeable timeframe. In response, certain eFunds executives committed to finalize an agreement between eFunds and ATM Holding.

11. On July 2, 2001, eFunds and ATM Holding executed a commitment letter, whereby eFunds agreed to a timetable in which it would purchase the remaining 76 percent of Access Cash based upon a total valuation of $57 million (the "Commitment Letter"). The Commitment Letter also contained provisions that provided that eFunds would pay ATM Holding various penalty payments totaling $1.5 million if the acquisition was not completed by certain milestone dates through March 31, 2002.

12. On August 14, 2001, eFunds filed its Form 10-Q for the second quarter ended June 30, 2001, reporting as revenue approximately $2.1 million of equipment sales revenues that were assigned by Access Cash as the purported penalty payment under the Amendment Agreement.

13. In October 2001, eFunds acquired the remaining 76 percent of Access Cash from ATM Holding and from a minority interest holder of Access Cash. The acquisition resulted in the termination of the Management Agreement, the Amendment Agreement and the Commitment Letter, including any payments thereunder.

14. On November 14, 2001, eFunds filed its Form 10-Q for the third quarter ended September 30, 2001, reporting approximately $2.4 million of equipment sales revenue received from Access Cash and $3.2 million paid to Access Cash and ATM Holding, under the terms of the Amendment Agreement and the Commitment Letter.

15. In February 2002, in response to questions raised by Access Cash's former chief financial officer, the audit committee of eFunds' board of directors conducted a review of the circumstances under which eFunds and Access Cash entered into the Amendment Agreement and eFunds and ATM Holding entered into the Commitment Letter. Based on the review, eFunds concluded that the Amendment Agreement and the Commitment Letter were interdependent and therefore should have been treated as one agreement that became effective in July 2001. eFunds further determined that equipment sales revenues assigned to it by Access Cash under the Amendment Agreement, which were originally recorded as eFunds revenues, and fees paid to Access Cash and ATM Holding under the Amendment Agreement and the Commitment Letter, which were originally recorded as eFunds expenses, should have been accounted for as advances and repayments on the purchase price for ATM Holding's remaining equity interest in Access Cash. This resulted in a $1.3 million net reduction in the purchase price paid by eFunds for the remaining equity interests in Access Cash.

16. On March 4, 2002, eFunds restated its financial statements accompanying its Forms 10-Q for the second and third quarter of 2001. For the second quarter of 2001, as restated, eFunds' revenue declined from $128.2 million to $126.0 million, a decrease of 1.7 percent, and its net income declined from $8.7 million to $7.7 million, a decrease of 11.5 percent. For the third quarter of 2001, as restated, eFunds' revenue declined from $135.4 million to $133 million, a decrease of 1.8 percent, and net income increased from $13.2 million to $13.6 million, an increase of 3 percent.

Violations

17. Section 13(a) of the Exchange Act requires all issuers with securities registered under Section 12 of the Exchange Act to file periodic and other reports with the Commission containing such information as the Commission's rules prescribe. Pursuant to Section 13(a), the Commission promulgated Rule 13a-13 that requires issuers to file quarterly reports. The reporting requirements necessarily include the requirement that the issuer supply accurate information. In addition, Rule 12b-20 requires that reports contain such further material information as may be necessary to make the required statements, in light of the circumstances under which they were made, not misleading. As a result of the conduct described in paragraphs III.1. through III.16. above, in its Forms 10-Q for the second and third quarters of 2001, eFunds violated Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.

18. As a result of the conduct described in paragraphs III.1. through III.16. above, eFunds violated Section 13(b)(2)(A) of the Exchange Act which requires public companies to make and keep books and records which accurately and fairly reflect its transactions and dispositions of assets. eFunds failed to keep accurate books and records regarding its transactions with Access Cash and ATM Holding.

19. As a result of the conduct described in paragraphs III.1. through III.16. above, eFunds violated Section 13(b)(2)(B) of the Exchange Act which requires public companies to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurance that, among other things, transactions were recorded as necessary to permit preparation of financial statements in conformity with Generally Accepted Accounting Principles and to maintain accountability of assets. eFunds failed to devise and maintain a system of internal accounting to ensure that transactions were properly recorded.

IV.

In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by Respondent and cooperation afforded the Commission staff.

V.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent eFunds' Offer.

Accordingly, it is hereby ORDERED that pursuant to Section 21C of the Exchange Act, Respondent cease and desist from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder.

By the Commission.

Jonathan G. Katz
Secretary

Endnotes

1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.